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Free Market Government

This post will be especially confused. I am thinking about cash bail and how it is unacceptable that richer people have more liberty than poorer people. For some reason my thoughts turned to Jeffrey Epstein currently held without bail, because of course. Now he hasn’t been convicted yet, and I do support the 5th and 6th amendments, so I have a problem. I will try to solve the problem.

I’m going to start with Hobbes, Locke, Mill and Nozick (which one here is not like the others ?). I don’t believe that the moral law contains an article about private property — I think private property is a very useful even necessary social institution, but not a transcription of objective moral truth (this is following Michael Walzer sometimes colleague of Robert Nozick). But for this post, I will assume there are natural rights to private property (following Locke). And, like the listed guys, I will pretend that there is an actual social contract and that people are bound only by contracts they accept. I will go for 3 out of 4 and say they can’t be accepted under the threat of force. The guy who’s not like the other is Hobbes who was an absolutist and claimed that signatures extracted by force counted (his example not mine was armed robbery).

I conclude two things. One is that the maximum morally acceptable tax rate is roughly 100%. The other is that I can set bail for Epstein. Granting Locke, Mill, Nozick and von Hayek all they can imagine demanding, I end up concluding that they have (almost) nothing. I will discuss this after the jump.

But here I will try to focus on financial bail. The problem isn’t that people can buy temporary liberty with private property. The problem is the cash part, which favors the non liquidity constrained, and also the incorrect application of equality under the law. People must be treated equally. Dollars must not be treated equally. It’s one or the other. Bail should be set as a fraction of the defendant’s wealth (including human wealth that is future labor earnings). Currently, the idea is that bail is a number of dollars possibly adjusted for wealth. There is no way to get to justice starting with the idea that all dollars are, more or less to first approximation, equal.

Also high bail. With no liquidity constraint problem, there is no reason to have bail proportional to anything. I think the rule is simple, show up or any correct spelling of your name is a legally valid signature. You don’t play by our rules (showing up for your trial) and there will no longer be any concept of forging your signature. Everyone has the right to sign for you (especially including the Bailiff who will write checks to the state worth the balance of every known account in your name). Any future claim that you have exclusive ownership of anything will not be enforced. And by exclusive that means your claim that you own something any more than I do.

Epstein might still run away, but he would be running barefoot (someone would have taken his private jets, automobiles, and shoes). Natural rights do not include a natural right to have the state prosecute someone for forging your signature.

Now the dollar value of everything you own bail would be greater the richer the defendant. This is fair and equal. It implies discrimination against some dollars, which is no problem.

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Enforcing the Constitution

I have met this man on several occasions. He is one of the most unimposing and quiet people I have ever run across. You would never know he is one of the most knowledgeable and capable constitutional attorneys in the nation having testified to Congress on SCOTUS appointments.

Erwin Chemerinsky: In Marbury vs. Madison, in 1803, the Supreme Court declared that it is “the province and duty of the judicial department to say what the law is.”Quoting Chief Justice John Marshall from Marbury vs. Madison (1803) footnote 742, the Court declared:

“It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases, must of necessity expound and interpret that rule. If two laws conflict with each other, the courts must decide on the operation of each.”

Justice Elena Kagan in minority dissent:

Justice Elena Kagan wrote: “For the first time ever, this Court refuses to remedy a constitutional violation because it thinks the task beyond judicial capabilities. And not just any constitutional violation. The partisan gerrymanders in these cases deprived citizens of the most fundamental of their constitutional rights: the rights to participate equally in the political process, to join with others to advance political beliefs, and to choose their political representatives. In so doing, the partisan gerrymanders here debased and dishonored our democracy, turning upside-down the core American idea that all governmental power derives from the people.”

The Supreme Court just abdicated its most important role: enforcing the Constitution

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No more mister nice guy

(Dan here…lifted from Robert’s Stochastic Thoughts)

by Robert Waldmann

Nomoremisterniceblog almost states the bitter truth, but he’s too nice to tell us what fools we are.

He wrote:

I don’t want to relitigate the McGovern and Mondale campaigns, but Dukakis? “Free everything and impossible promises” weren’t what defeated him.

My comment

I want to relitigate events of 1984, which Delaney has sent down the memory hole. Mondale was not hammered because he made promises he couldn’t keep. He said he was going to talk to us like grownups. He said he was going to increase taxes (but not increase taxes on families with income under $ 30,000 which would be about $60,000 now with inflation).

So the people of the USA had to choose between a serious guy who told us the truth and the guy who promised that lower taxes meant higher revenues. It is obvious that most voted for Reagan who made absurd promises which he obviously couldn’t keep.

Now there have been Democratic candidates who promised to reduce the deficit and reduce taxes on most families — Clinton and Obama ‘– exactly the two non incumbent Democrats who won when the Income tax was constitutional and the top rate was under 55%. Obama also actually delivered (not that many people noticed) while Clinton was suddenly (not permanently) unpopular when Rubin convinced him we couldn’t afford a middle class tax cut.

Unlike her husband, Hillary Clinton was honest about budgetary and political limits. Unlike his wife, Bill Clinton was elected President.

The lesson is simple. Don’t treat the US public like adults. Do make promises, including some you can’t keep. The data are clear. Anyone who lives in the real world knows this. Only dreamers like Delaney, Dukakis, Mondale, Gore think you can win as the speaker of inconvenient truths.

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A Serious Problem For Dems

A Serious Problem For Dems

It is that progressive Dems some time ago glommed onto the idea that protectionism is “progressive.”  It has been going on so long and has become so ingrained that Bernie Sanders has been running around bragging about how he is more protectionist than Trump.  Elizabeth Warren has been a bit more subtle about it, calling to renegotiate all existing US trade agreements to make them super strong on labor and environmental standards.

The problem is that one of the biggest disasters of the Trump presidency has been his trade wars, now pushed further with his latest move to raise tariffs on another $300 billion in Chinese imports.  Stock markets and oil markets took huge dives all over the world on this.  The Fed has just cut interest rates to offset the negative effect on the world economy of Trump’s trade wars.  Trump has delivered a big fat zero in terms of anything positive from his protectionist moves, and even industries that were crying for protection, such as steel and and autos, are now complaining about his trade wars.  And this has done a big fat zero for workers as well, whom supposedly our great “progressive protectionists” claim they are spouting their now completely irrelevant drivel.

This is going to be one of the biggest issues in the coming campaign, and while so far almost nobody is focusing on it, both Sanders and Warren are complete and totally worthless disasters on it.  I find this very frustrating given that on so many other issues they make a lot of sense.

Barkley Rosser

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Rick Wilson, His Former Party and 1984

I really enjoy Rick Wilson’s thoughts on the Republican Party, his former party until 3 years ago. I don’t know which part of his latest Washington Post Op-ed I like most but here goes:

As the saying goes, you had one job, Republicans. Now? Your job really isn’t representing your districts. It’s backfilling and wallpapering over your president’s latest excesses, outrages, racial arson and verbal Twitter dysentery. Every day is a new crisis, and every day demands their complete attention. When he eventually tweets that he was the first person to arrive at Ground Zero or that he invented the question mark that one summer in Yangon, count on his congressional footmen and the Fox News Ministry of Truth to find a new way to spin it.

For Republicans, it’s an endless summer of crying themselves to sleep at Newspeak immersion camp.

My bolding of references to 1984. Ouch that’s going to leave a mark.

However, like many never Trump Conservatives, Wilson insists that conservative doublethink, duckspeaking and blackwhite are new things. He also has the trait typical of those who recently emerged from the Conservabubble of assuming that universal values are conservative values and that leftists are mirror images of conservatives rejecting what the principles they claim. So I can’t resist fisking his column which I will fair use after the jump.

Before the jump I will just note that it is not clear how much of the following description of Trumpian lunacy is covered by “when it comes to articulating anything close to traditional GOP beliefs, he’s as likely to sound like the lifelong Democrat he was until Republicans tell him what to think.” I don’t think he was ever a sincere Democrat anymore than I think he is now a sincere Republican. He is and was a Trumpian.

But more importantly, Wilson refuses to recognise just how far the GOP had already strayed from its declared principles or any standards of reason, logic or decency long before Donald Trump descended the elevator escalator. He describes Trumps typically Republican actions as betrayals of a tradition that has long since been abandoned (I date the betrayal November 1876 but your mileage may differ).

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On Yglesias on the Dramatic 0.25% Rate Cut

Monetary policy is roughly the only issue on which I regularly disagree with Matt Yglesias. So it is boring to note that I agree with almost everything he wrote in his Vox article on the recently announced 0.25% Federal Funds target rate cut.

His main assertions are:
– it is a very reasonable move even though Trump advocated it and it will help Trump’s 2020 campaign.
– The previous stance of normalizing interest rates because normal interest rates are normal made no sense
– The argument that higher interest rates are good because there is more room to cut interest rates if there is a recession makes no sense.
– It is too bad that it sure looks as if the Fed Open Market Committee (FOMC) bowed to pressure, but it is not worth doing something stupid just to prove your independence.

As I said, I agree with all of that. There is no reason not to cut interest rates if inflation is persistently below target (also I think the target should be 4% not 2% because that would actually leave more room to cut real interest rates if there is a recession).

I do have three criticisms. One is he praises Trump’s asseesment that interest rates were too high starting January 20 2017. Come on. Trump said they were much too low until November 8 2016. He knows what is good for Trump in the short run. Pretending he has any views on economics except that anything bad for foreigners is good for the USA and therefore good is silly.

The second is he does not explain correctly how interest rates affect demand. He wrote ” Lower rates mean it’s cheaper to finance investments in home renovations, business equipment, and other expensive durable goods. ” The word “equipment” is particularly silly. In fact, the user cost of equipment is mostly depreciation (now at least mostly due to technological obsolescence). If the price of your equipment declines by 30% a year (like the price of the laptop on which I type) an additional 0.25% a year of interest is almost entirely irrelevant. In fact, non residential fixed capital investment barely responds to interest rates except through the effect of interest rates on final demand which affects the return on capital and free cash flows.

Nor are home improvements all that important. The main channel of the transmission of monetary policy is through the mortgage interest rate which affects house sales and house prices which affects construction of new houses. Krugman (as usual) explained this very well. The data speak clearly.

Finally, he said QE was ended because it was fiercely criticized as likely to cause hyperinflation. It was, but the fact that, after QE1 during the financial crisis, further QE had no detectable effects on much of anything might have had something to do with it. It remains an article of faith to him that monetary policy is very important also at the zero lower bound. But the data speak clearly about that too.

Still I 99% agree with him on current monetary policy and I’m glad to get to 99.999999% agreement overall.

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Interest Rates and the Hack Gap.

Kevin Drum notes conservative hackitude. I’m just going to fair use the whole post

(please click the link so I don’t feel guilty)

I would like to offer a comment on the hack gap this morning:

It’s remarkable the number of liberal economists who continue to favor an interest rate cut from the Fed. They are displaying intellectually honesty here: with inflation low, there’s no reason not to take out an insurance policy that could keep the current economic expansion going for a while longer, despite the fact that it would help Donald Trump politically.

Conservative economists, by contrast, have almost universally changed their opinions, favoring high interest rates when Obama was president and now favoring low rates when Trump is president.

I’m too lazy to create an actual list of liberal and conservative economists to see whose positions have changed and whose haven’t. Maybe someone can do it and prove me wrong. But I doubt it.

After the jump I report on some googling.

But now I would like to discuss Fresh Water views on interest rates. After the jump, I say that academically prominent macroeconomists who work near great lakes are so far out into theory that they can barely communicate with policy makers or ordinary people.

Then I thought of the interesting case of Narayana Kocherlakota who, as chairman of the Minnesota economics department (a major center of fresh water macro) then the Minneapolis Fed (*the* main center of freshwater macro now that Chicago has gone brackish). I will discuss his academic work on money and interest rates. But the interesting thing is that soon after becoming a policymaker (serving on the Fed Open Market Committee) he pretty much repudiated all of it, the repudiated the mainstream of academic macro, turned into an interest rate dove (not a hack he went from hawk to dove during the Obama presidency). Dramatic and honest, demonstrating integrity (and brilliance in both periods).

But back in the day, he did work (published in top journals) which would have puzzled his colleagues on the FOMC. First in standard fresh water monetary models there is always full employment. There is no role for monetary stimulus. Second, the models typically give an optimal nominal interest rate i of 0. This is not extremely loose monetary policy, because typically the optimal inflation rate is negative giving a market clearing real interest rate. Over in the real world, it has been noted that negative inflation rates are strongly correlated with great depressions. Partly, this is because only extremely high unemployment can cause workers to accept lower nominal wages. Such downward nominal rigidity is absolutely alien to new classical (freshwater) macroeconomics and almost entirely alien to New Keynesian DSGE (mainstream) macro. The fact that it is blatantly obvious to anyone who looks at micro data is irrelevant. But also negative inflation causes an increase in the real value of debts which causes huge trouble. This is because debt contracts are written in dollars or euros and not indexed to the CPI. There is no reason why creditors and debtors both bet on inflation and face risk which they could avoid. Therefore such contracts don’t exist, because over there they agree with Hegel that only that which is rational is real.

The point is that if one argues for moderate real interest rates, zero nominal interest rates, deflation and notes that one assumes all markets clear, one will have some difficulty being a hack. Also one will have trouble making policy. Kocherlakota demonstrated that he is not only brilliant but also serious. He flip flopped because of evidence. It is a pity this is so rare that I think it’s worth a post.

OK I hunt hacks after the jump. I’m not sure I found any. I think the hacks are conservative “economists” not conservative economists.

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Degeneration of Bipartisan Blog Sites: Econbrowser

Degeneration of Bipartisan Blog Sites: Econbrowser

This is probably just a whiny complaint of well-known and long running issues.  Indeed for a long time most blog sites (not to mention most twitterspheres and Instogram Idiotspheres) have been mono-partisan in those who participate in their discussions/debates. This has been true for a long time for most sites in the Econoblogosphere, including this site, which clearly tilts “left,” even though we have always been open to comments from a wide variety of views.

I have in mind here a particular blog site that I respect and have been spending a lot of time and attention at for some time. It is Econobrowser, initially set up by Jim Hamilton, now at UCSD, and a leading time-series econometrician, long viewed as a nonpartisan technocrat. Some years ago he brought in Menizie  Chinn of UW-Madison as a co-blogger, with Menzie becoming the main poster recently, with Jim H only rarely now posting or commenting on anything.

This site has been for some time now one of the few among higher level economics sites where people from different partisan positions have been regularly posting, reasonably intelligently.  It has been for some time tilting “left,” as Mr. Apolitical Jim H rarely posts, with Menzie Chinn dominating the site.  He served for both both Clinton and G.W. Bush as staffer on the CEA, giving him a cred cover of bipartisanship, although since Trump came in he has clearly been negative on Trump.

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Pledging Zero Carbon Emissions by 2030 or 2050: Does it Matter?

Pledging Zero Carbon Emissions by 2030 or 2050: Does it Matter?

We now have two responses to the climate emergency battling it out among House Democrats, the “aggressive” 2030 target for net zero emissions folded into the Green New Deal and a more “moderate” 2050 target for the same, just announced by a group of mainstream legislators.  How significant is this difference?  Does where you stand on climate policy depend on whether your policy has a 2030 or 2050 checkpoint?

I say no.  Neither target has any more than symbolic value, and what the government does or doesn’t do to prevent a klimapocalypse (can we use this interlingual word?) won’t depend on which one gets chosen.

Endpoint targets have no constraining power at all.  A 2030 target won’t be met or unmet until 2030, and by then it will be too late.  Same, and worse, for a 2050 target.  Moreover, the whole target idea is based on a misconception of how carbon emissions work.  The CO2 we pump into the atmosphere will remain for several human generations; it accumulates, and the sum of the carbon we emit this year plus next plus the one after and so on is what will determine how much climate change we and our descendants will have to endure.  (The relationship between our emissions and the earth system’s response is complex and may embody tipping points due to feedback effects.)  Every additional ton of carbon counts the same, whether it occurs today or just before some arbitrary target date.

What we need instead is a carbon budget, an announced total quantity of emissions we intend to hold ourselves to, starting right now and continuing through the end of the century.  That way, whether we’re living up to our pledge or scrapping it is put to us each year based on how quickly we’re using up our quota.  It sets the meter running now.

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